Innovative MoD initiative to clear production policy bottlenecks

A new and unconventional mechanism holds genuine promise for easing the private sector’s entry into indigenous defence production.

On Saturday, at the Institute for Defence Studies and Analyses (IDSA) here, the Minister of Defence (MoD)’s procurement chief — Director General (Acquisitions) Satish B Agnihotri — and a group of senior MoD officials will meet with private sector defence heads, discussing and resolving their difficulties.

This will be the third such meeting of this informal, but highly effective, forum. Agnihotri instituted this outreach after making the unprecedented decision to resolve private industry structural problems in face-to-face meetings at the IDSA on Saturdays.

Since the private sector was allowed into defence production in 2001, policy hurdles, discriminatory taxation regimes and organisational bias in favour of the public sector have placed structural hurdles before private companies hoping to benefit from India’s enormous defence market.

“For the first time in a decade, we are beginning to feel like we are not talking to a wall,” says Rahul Chaudhary, co-chief of Ficci’s defence committee and chief executive officer of Tata Power (SED).

Achievements of the Saturday Forum include the issue last week of a tender for four Landing Platform Docks (LPDs), giant 21,000-tonne helicopter carrying ships that will be built by India’s private sector in consortium under the “Buy & Make” (Indian) category. Also initiated last week was a project for building a Battlefield Management System under the “Make” procurement category.

Private industry chiefs say that individual problems are not discussed during the Saturday meetings — only issues that relate to the entire industry. For that reason, the private sector representation is restricted to industry bodies CII, Ficci and Assocham.

“If private companies come and meet me one-on-one, it sometimes spells trouble for me,” said Agnihotri at a Ficci function on Thursday evening. “So I would rather meet with industry bodies.”

Agnihotri says his plan for creating a role for the private sector has centred on small, sustainable steps rather than spectacular policy changes. Like many officials and industrialists who are adopting Tendulkar similes, Agnihotri uses one to illustrate the bureaucratic and political difficulties in making bold changes.

“Defence has certain peculiar characteristics… the outfield is slow. If you just keep waiting to score boundaries, I’m sorry but you will not score very much. The trick lies in singles and twos, which one can take,” he says.

This Saturday’s meeting will be Agnihotri’s last, as he has been transferred out on promotion as secretary in the Ministry of New and Renewable Energy. On the agenda are measures for giving MSMEs a larger role in defence production.

“One man has made a substantial difference in a very short time. We hope this initiative continues,” stated Jayant Patil of L&T, who handles research and development in Ficci’s defence committee.